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just had returned over to a concern in Chicago a very large amount of property, together with all the accrued income. In the other case I referred to the money was taken in cash. It was the capital in his co-partnership of an American who had gone to Germany, and on which capital he was having an income. He was practically a retired partner, being over 75 years of age, and he was receiving an income of from 8 to 10 per cent on his capital in the firm. This interest was liquidated at $270,000 and some odd figure and that amount given in cash to the Alien Property Custodian who held it for 20 months. Then, after the party returned and made his application under section 9, he was handed back a check for exactly the same amount as the custodian had received. In the case of our Chicago clients they got back all of the accrued income and interest; in the case where it was taken in cash, our client had to give a general release without getting one dollar of income for the 20 months during which he had been deprived of his property.
The CHAIRMAN. Where cash is thus taken, doesn't the Alien Property Custodian convert it into Government funds?
Mr. BUTLER. The Alien Property Custodian has permission to do so, but if it were not done, no interest is received.
Mr. Boggs. It is not the Alien Property Custodian that has the power to dispose of this cash. It is his duty under the law to turn it over to the Treasurer of the United States and that official is the one that has the power to convert it into bonds and is directed to convert it into bonds.
The CHAIRMAN. I was wondering why that was not converted into bonds so that the owner thereof should have the benefit of the proceeds, the interest.
Mr. Boggs. It is so converted, sir, but the Treasurer of the United States always keeps available a certain proportion of cash funds with which to pay back these claims.
The CHAIRMAN. He keeps an amount of free assets in his hands to meet current accounts?
Mr. Boggs. Yes, sir.
Mr. BUTLER. Might I say here that I would like to insert in my testimony the explanation which we received from your office as to why we got no interest on that $270,000?
Mr. Boggs. You are at liberty to use anything that you have from us.
Mr. BUTLER. We are not criticizing. I am not sure that under the act we could have obtained that interest unless it was actually invested because section 12 is permissive. Besides, we have given a general release. We filed—we are filing—a claim, however, that is more in the nature of a petition or request, in the hope that something will be done.
As I remember-[to Mr. Boggs] : Please correct me if I am mistaken—the answer came from the custodian that while there was permission to invest, there was always a large cash balance kept by the Alien Property Custodian and, therefore, it was impossible to state whether or not our amount, which is only an infinitesimal part of that large balance, was or was not invested. As it could not be definitely determined whether it was or was not invested, it was impossible for the Government to figure that this specific amount did actually earn any income, and therefore we have nothing to represent 20 months' income on $270,000.
Now, the result of that is that some of the people whose money was taken have not suffered a dollar of loss. They have gotten back their money with interest. In the case of my Chicago friends, they have had turned back to them all of their real estate, all of their mortgages, and all of the accumulated income thereon from the depositary who collected it. In that case the people have not contributed anything whatever toward the winning of the war. In this other case, our client in New York has given up his entire income on $270,000 for 20 months toward that same purpose. Now that is an inequality which we hope this bill to be reported by this committee will correct.
Mr. SWEET. In one instance the money was turned over, and in the other instance securities or property was turned over?
Mr. BUTLER. Yes, sir.
Mr. SWEET. One was drawing a natural income and the other was property turned over which has not been invested in bonds.
Mr. BUTLER. It has not been invested, although the act gave permission for such money to be so invested. Now that money was deposited somewhere. It relieved the United States of the necessity of selling that many Liberty bonds for that period. Certainly the money did not—could not-have lain idle. Interest was either earned or interest was saved.
Of course, I need not tell to the members of this committee, who are all undoubtedly familiar with the story, what happened to the servant who kept the money of his Lord in a napkin, and who, when the King came back, brought the money to him and said, “Here is thy money," but as I remember, he was not commended for his carefulness. And we are only bringing this up as a suggestion as to whether or not this committee while it is considering this bill can do anything to relieve those, who by reason of the Government not having—the Government officials-not having availed themselves of the permission, did not invest this money, even as his Lord said to that servant, so can it now be said to the custodian- “ Thou couldst have taken and bought Liberty bonds, and on my return I would have received my own with whatever the coupons amount to.” We presume that all the members of this committee know what happened to that servant, and we trust that none of them will share the condign punishment that was meted out to him as the result of his mistaken ideas as to carefulness in handling other peoples' money.
So it seems to me we have the precedent of some authority for suggesting that that money should not come back, as it were, in a napkin, merely for an exact payment of what was taken, when others, merely by reason of the fact that it was invested—in some cases the depositaries, who, like the other servants in the incident above referred to (I think I am right in this, am I not, Mr. Boggs?)-have invested the money that they have had and returned the same with
usury”—although in this case we suggest a more modest rate than was allowed in those times.
Mr. Boggs. No, sir; the depositaries are required under the law, under the regulations, I should say, promulgated for their governing, to account quarterly to the Alien Property Custodian for all income
received by them, and they accompany that accounting with a check for the amount, and that check is then deposited by the Alien Property Custodian with the Treasurer of the United States. No cash is kept on hand by the Alien Property Custodian at all at any time. As soon as these quarterly remittances come in from the depositaries who are financial agents of the Alien Property Custodian, provided by law, it is turned over immediately to the Treasury, just as soon as the entries are made out on our trust ledgers.
Mr. BUTLER. But if that is income, it goes to the owner of the money.
Mr. Boggs. If it is income, it will be turned over as part of the money returned.
Mr. BUTLER. Yes. That is all I wish to say, gentlemen. I thank you very much for your courtesy.
The CHAIRMAN. When you get your transcript back, you can add by way of suggestion the amendments that you think should be incorporated in these bills.
Mr. BUTLER. I will be very glad to do that.
The CHAIRMAN. Is there any other witness who wishes to be heard this morning? We have a few minutes more.
Mr. BUTLER. Could I say just one more word, and that is I would like to say that in my view an amendment to section 9, expanding the powers of the Alien Property Custodian with regard to this class of money might be very effective in helping him to liquidate under the present rules and regulations that are now in force.
STATEMENT OF MR. LUCIEN H. BOGGS, GENERAL COUNSEL,
OFFICE OF THE ALIEN PROPERTY CUSTODIAN.
Mr. DEWALT. Mr. Boggs, I would like to present a case to you which is apt to be met by these bills. I will try to formulate it.
A and B have what is known as a joint account in the Allentown National Bank. They deposit $10,000 in the bank. It being a joint account, either one has the right to draw upon that account, and, upon the death of either, the survivor becomes the owner of the account.
A lived, or afterwards went to Germany, remained there and is now in that alien territory.
B, the other owner of the joint account, is also still alive, but lives in France, which is friendly territory, allied territory. Under the law, as I take it, the Allentown National Bank, as depository, could not divide that fund and say that one-half of it belongs to A and the other half of it belongs to B, because it was a joint account and because it was deposited so that the survivor should become entitled to the entire amount upon the death of the other party.
The Alien Property Custodian, after the declaration of war, takes this account by notifying the Allentown National Bank to hold the money, as it belongs to an alien enemy, to wit, it belongs to A, who lives in German territory. The Allentown National Bank makes a return and says, “Yes; we have $10,000, a joint account deposited in the names of A and B, with a right of survivorship.” That return is made to the Alien Property Custodian. But B now comes in, who lives in France, and says, “I am not an alien enemy; I have lived in inay be
friendly territory, to wit, in France. I have the right to draw upon that account because it is a joint account, and I issue my check for the whole of the $10,000.” The Alien Property Custodian then replies and says, "No; that will not do. You can not divide this fund. A, your joint depositor, is an alien enemy by reason of the fact that he resides in alien territory, and therefore we can not give you that money.” “But,” says B, who resides in French territory, to wit, in France, “I have the right of survivorship if A dies.”
But," says the Alien Property Custodian, “A is not dead and A also has the right of survivorship if you die,"—to wit, if B dies. B then replies, “ That
So, if either one of us is dead, but I have been a friend all the while that you are holding my money as the Alien Property Custodian. I have the right to check that out." The Allentown National Bank holds it, of course, as a semitrutee both for the Alien Property Custodian, representing the Government, and the trustee for A and B. Now, what I want is my money. I am a friend and I have been all of the time.”
Now, do you think that a case of that kind ought to be met by legislation?
Mr. Boggs. In my opinion, that kind of a case should be taken care of properly under existing law.
Mr. DEWALT. Tell me how.
Mr. Boggs. For this reason, that the law says that any person that is not an enemy or ally of an enemy, and having or claiming to have any right, title, or interest in money or other property which has been taken over by the Alien Property Custodian is at liberty to file a notice of claim asserting his claim to the property with the custodian, and thereupon the claimant has either one of two remedies: He may prosecute a nonlitigated claim, which will be decided upon by the Attorney General of the United States; or he may at his election bring suit in the district court of the United States in the district in which he resides; or, if a foreigner, in the Supreme Court of the District of Columbia, and assert his title to the property, and that case then would be considered just like any other case at law in which there was an assertion of a paramount title to the property, and it would be open to him then to, show what were his equities and what were the adjustments between him and B in that matter. And I take it that if two men had deposited money under such a joint account there would be some adjustment and equity between them so that one or the other of them on an accounting would be entitled either to the whole fund or to some ascertainable portion of it.
Mr. DEWALT. You think the course of procedure in the case would show the equities existing between the parties?
Mr. Boggs. Yes. And further, I think there is a clear demarcation in the history of the case that you have recited. If prior to the taking over of that property by the Alien Property Custodian a check had been drawn by the man living in France, I think that the bank in Allantown would have been at perfect liberty to honor that check and pay it out.
Mr. DEWALT. No doubt about that.
Mr. Boggs. But a state of war then existed between those two countries, and the purpose of the trading with the enemy act was to prevent the enemy from getting any benefit from credits or funds in this country, and that purpose could only be attained by the custodian putting an embargo on that fund.
Mr. DEWALT. That is right.
The CHAIRMAN. Are there any other questions? If not, the committee will adjourn.
(Whereupon, at 12 noon, the committee adjourned.)
COMMITTEE OF INTERSTATE AND FOREIGN COMMERCE,
HOUSE OF REPRESENTATIVES,
Washington, D. C., Tuesday, April 27, 1920. The committee assembled at 11 o'clock a. m., Hon. John J. Esch (chairman) presiding.
The CHAIRMAN. Mr. Kahn, you desire to make a statement with regard to H. R. 10103, do you?
Mr. KAHN. Yes.
STATEMENT OF HON. JULIUS KAHN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA.
The CHAIRMAN. You have introduced a prior bill; is this one to succeed that?
Mr. Kaun. Yes; this is to take the place of that prior bill, which was H. R. 13262, in the last Congress.
The CHAIRMAN. What was the number of the prior bill in this Congress, H. R. 6373!
Mr. Kaun. Yes; that was introduced in the early part of this Congress. But H. R. 10103 is the bill that was subsequently introduced; that was introduced after Mr. Brodhead, who died last Friday, and I had talked with the Attorney General, Mr. Palmer.
I, of course, have not followed the matter as closely as I probably would have followed it had not Mr. Brodhead been interested therein on behalf of California associates. When he passed away two or three days ago, that compelled me to look into the matter hurriedly. He could have given the committee a great deal more of important information than I can possibly give at this time. Let me briefly state the situation regarding the proposed legislation:
This legislation is asked by a great many sufferers in the San Francisco fire of 1906; that was the great earthquake and fire. Most of the English insurance companies met their losses almost at 100 cents on the dollar; the American companies paid in full; one or two companies in this country failed, possibly three or four; I do not recall. But the German insurance companies had been looked upon as exceedingly strong, and they carried considerable insurance. Immediately after the fire they began to deny liability, and some of them left the State entirely-left no agent in the State.
Among the worst offenders was the company known as the Aachen & Munich Insurance Co. Then there was the Hamburg-Bremen Insurance Co., and, I believe, the Prussian National Insurance Co.
After the lapse of some time their agents came back and began to consult the insured to see whether compromises could not be made.